In response to a question from Patricia Ferguson, chair of the Scottish Affairs Committee, about whether the government was considering the “potential merits” of regulating estate agents to ensure best practice, Pennycook said that where there is “evidence of such practices”, estate agents can face sanctions – including a ban – if they are found to be conditionally selling.
“The government is committed to protecting people from abuse and poor service at the hands of unscrupulous property agents and to improving estate agent standards more generally,” he said.
Earlier this year, a Panorama documentary revealed conditional selling tactics in some branches at two estate agents, Connells and Purplebricks, leading to public and industry backlash against the practice.
Pennycook pointed to the National Trading Standards Estate Agency Team (NTSEAT) as the “lead estate agent enforcement authority”, noting it works with local authority Trading Standards teams to ensure estate agents comply with legislation.
“NTSEAT have powers to issue warnings and banning orders against rogue agents. In cases of conditional selling, it is essential that any misconduct or manipulation in the offer process is reported to help build a clearer picture of the problem and support potential investigations,” he explained.
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Pennycook added that the Ministry of Housing, Communities and Local Government “engages regularly” with NTSEAT to “discuss how best to address specific issues, including conditional selling, and continue to look at options to improve standards across the estate agent sector”.
He said the previous government had committed to regulate the property agent sector in 2018 and convened a working group chaired by Lord Richard Best to “advise them on how best to do it”.
However, Pennycook said they “failed to respond to the recommendations” set out in the working group’s 2019 Regulation of Property Agents Working Group report.
The recommendations included:
- A model for an independent property-agent regulator, including how it will operate and how it will enforce compliance.
- A single, mandatory and legally enforceable Code of Practice for property agents.
- A system of minimum entry requirements and continuing professional development for property agents.
- Clarifying processes and charges for leaseholders.
“We will set out our full position on regulation of estate, letting and managing agents in due course,” he said.
Nathan Emerson, CEO of Propertymark, said purchasing a property is a “significant life decision”, and buyers and sellers “must feel confident in choosing professionals who support them to the very highest standards throughout the entire transactional process”.
He added: “In the majority of cases, consumers typically receive a great level of service that they would recommend from qualified agents. Conditional selling, however, unfairly limits a person’s ability to select products and services that might best serve their personal needs.
“Propertymark works closely with the NTSEAT and other organisations, as it is important that the sector discusses such issues in a frank and honest manner and raises awareness for consumers, including the paths to escalate potential disputes. It remains important to underscore that this conduct is not tolerable and has been an illegal practice for over 45 years as part of the 1979 Estate Agents Act.”
‘More regulation and consequences’ for conditional selling needed, brokers say
Emily Franks, director of Emily’s Mortgage Services, said the sector needed to see “more regulation and consequences for estate agents breaking the law”.
She said: “At the moment, there is no accountability for it, and they get away with it. It goes against Consumer Duty and vulnerable customers are targeted. It’s rife in the industry, with estate agents overstepping their boundary under the guise of anti-money laundering.
“The sooner the government steps in and sets up an independent regulator like the FCA/SRA/RICS, the better. It’s a conflict of interest for mortgage brokers to work in the same offices as estate agents and for estate agents to receive commission based on referring clients over. It financially incentivises conditional selling.”
She has launched a petition calling for more regulation to enforce consequences for conditional selling, which can be found here.
Matthew Poole, director of Poole Family Financial, said “time and time again”, there were “stories that buyers are having their emotions played with, when looking to offer on a property” by “rogue estate agents”, and this was typically first-time buyers.
“First time buyers are generally guided by professionals, as they have no experience of the buying process and have a huge fear of missing out on a property they fall in love with.
“Certain agents will play on this to their advantage and make comments such as, ‘your offer can only be put forward if you use our in-house broker’ or, ‘your house purchase will go through quicker if you use our recommended solicitor’. Generally untrue statements with the motivation being a financial gain,” he said.
Poole said buyers “need to remember that the agent is working for the seller” and urged the government to “go further to ensure the current rules are adhered to by the agents who adopt these illegal tactics”.
“It’s been mentioned that agents that do this can face sanctions, including a ban. I’ve been in the industry for over 10 years and this has always been an issue with certain agents, and I have never seen any of these sanctions or bans put in place, with clear evidence of breaching the rules.
“Something clearly needs to change to hold these agents to account. This isn’t all agents and I have come across brilliant agents who treat each buyer with respect and never try and influence any of these additional services,” Poole said.
Dan Gracie, specialist lending director at Panthera Finance, said conditional selling from some estate agents and new-build sales offices is “nothing new”.
Gracie started his career in the property sector as a property lister at Countrywide and said that from his training in 2002, there were two key acts that “effectively outlawed” conditional selling.
This was the Estate Agents Act 1979, which required agents to forward all purchase offers, and the Estate Agents (Undesirable Practices) (No. 2) Order 1991, which prohibited discrimination on the grounds that a purchaser will not be, or is unlikely to be, accepting other services.
“I was fortunate enough to be managed by a couple of straight-down-the-line, decent, moral family men who lived and breathed the Treating Customers Fairly outcomes years before they came into force and impressed the above two acts so firmly on me that I remember them clearly, even 23 years later,” he said.
Gracie said he understood why “cross-selling” happens, as estate agents can “earn a significant income by making referrals to mortgage brokers”.
However, estate agents “conditioning, manipulating and lying about the rules are not the way to achieve cross sales”.
“Bonding with your clients, doing a good job for them, earning their trust and being upfront about the services you offer are the way to do it. When I was an estate agent, between 2002 and 2005, I made a huge amount of referrals to the mortgage broker in my office and I did it purely by building genuine rapport with my clients and telling them that she was a great adviser, and she was.
“Fast-forward through 19 years as a mortgage broker and I’ve found myself on the wrong end of conditional selling on many an occasion. Fortunately, I arrange complex mortgages, and the agency-based brokers tend to back down very quickly when they get wind of my clients’ circumstances,” he said.
